Time to Put the Poor in Charge

by Mateo Pimentel / October 30th, 2014

Centuries ago, explorers, and economically charged navigators, firmly put to rout the idea of a “flat” world. Today, rather than equalizing development’s inborn global disparity, and rather than leveling the economic playing field, globalization has ushered into existence tremendous instances of developmental corrosion—especially among poorer states. Richer nations, and their ruling plutocracies, have grown incredibly wealthy as a direct result. Yet, just as today there is no reason to consider the world physically flat, no longer is there any reason to expect a forthcoming, economic leveling of the disparity in global development. Equitable development among rich and poor states alike is not a realizable coordinate, inevitably charted along the trajectory of globalization’s careening path. Taking anything for granted, even if innocently so, is illogical; it is absurd to think that globalization, and unfettered markets loosed about a liberalized world order, will yet bring about “first world conditions,” or development, within the Third World. So, why continue to assume that globalization sails in one providential direction? With boldfaced lies, the rich world would have us internalize that there is cause to stay the course; there is not. It is time to put the poor in charge.

After the 1970s and 80s, the income arroyo between first and Third World countries did nothing but widen. Sure, there may have been converging levels of industrialization; however, no one can deny that “developing countries” had to pay much closer attention to certain things like poverty in the 1990s, which 1980s market reforms caused to spike so precipitously. Such reforms included those outlined in the aptly named, and now notorious, “Washington Consensus.” The result was manifold, to say the least: price controls and subsidies were eliminated; quotas on imports were abolished, and tariffs reduced; interest rates rose; restrictions on private foreign investment were dissolved; privatization ran amok; trade unions lost power; labor found itself politically softened; minimum wage laws got the axe; public spending on the social sector generally shriveled; and there were serious declines in labor regulation.

These detrimental reforms from the 1980s occurred in part as a response to the idea that state intervention lead to market and economic inefficiencies, that it killed profitable opportunities, and that it cluttered industrial life. These consequences, some experts worried, would aversely affect society at large. More completely, the reforms that took place actually grew from the consequences wrought on Third World nations by the interventionist policy that left developing countries with staggering inefficiencies, and growth rates that did not mirror their economic potential. Needless to say, the lot of the poor, and their political position, did not improve globally. It goes without saying that industrialization did not hit its market. And ultimately, the Third World did not see first world conditions result from industrialization.

Many Third World countries endeavored to establish economic growth nationally (for their whole economy, distribution, and material security), and to attain levels of industrialization akin to those of the first world. They did so by pooling their productive sources in urban centers, which would act as a springboard for exports of all incarnations. Orienting labor and production toward foreign markets, though, is different from first world strategies, which use such productive hotspots to expand markets domestically. Where markets for capital underwent liberalization in the Third World, exposure to such sharp fluctuations led to outflows of capital, upped unemployment, and, as per the request of international financial institutions (IFIs), reductions in government expenditures on social sectors, and social protection.

Globalization, increased industrialization, and market expansion, not only disadvantaged least-developed countries (LDCs) in the last few decades, though; it also stratified wealth within the most aggressive, and traditionally more “stable” economies. Unskilled labor in the United States saw practically no change in terms of its real wages. China’s growth was explosive, but the amelioration of poverty, nominal. India’s poverty experienced little change, and agricultural reforms plagued the poor, driving many to suicide. And most nations within the region of Latin America experience virtually no positive changes in poverty. Today, a good portion of the labor pool still works in “low-productivity” agriculture. The rural poor, who encompass much of the Third World’s denizens, experience life the way it was more than two centuries prior. To think, however, that solutions to the Frankenstein of abortive rich world economics should come from the Third World may seem counterintuitive. But it should not. What is more, rich world citizens need to consider what responses these marginalized peoples proffer.

By 1982, Bolivia saw its military governments superseded by those who took power via elections. Bolivia suffered the debt crisis of the 1980s, and many acute problems caused by plunging prices in tin. Additionally, IFIs subjected Bolivia to especially stringent adjustment measures. Inflation decreased at the cost of Bolivia’s output. High unemployment was another outcome, along with increased poverty and an inegalitarian distribution of income. Then, the wealth of indigenous coca farmers grew radicalized, alongside the general population, as the US terrorized the poor nation with its attempts at coca eradication. The election of Evo Morales, former general secretary of the coca farmers’ union, catalyzed many social movements propelled by indigenous peasant laborers, and other workers. Then, what Bolivia accomplished from 2006 to 2009, was nothing short of incredible. Bolivia not only nationalized hydrocarbons, keeping more profit for the state, but it altogether established a new constitution. The landlocked nation elected to give its indigenous more power, to give the state more control of natural resources, and to decentralize itself. Socially, Bolivia armed itself a universal pension for those over sixty. It expanded programs of education, and introduced policy to eradicate illiteracy.

Venezuela is another pertinent example. Venezuela, as many know, was drastically unequal as a society. With the neoliberal agenda proposed by Perez in 1989, coups, and democratic alterations to political power, took root. Perez’s greatest neoliberal blunders included agreeing with International Monetary Fund (IMF) directives for: eliminating trade barriers; reduce tariffs; restructure the public sector; promote the privatization of many “parastatal” firms; and liquidating a large structure of subsidies. Venezuela saw immediate increases in inflation, higher unemployment (with the loss of many public sector jobs), furthered inequality, and backslides in Gross Domestic Product (GDP). Yet, when Hugo Chavez assumed power in 1998 and began making reforms, the world witnessed the onset of the broadest political response to globalized neoliberalism. Moreover, many change-seeking political movements backed Chavez’s democratic election, some of which date back to the 1950s and 70s. Chavez claimed his project was the fulcrum between the invisible hand of the market, and the “visible hand of the state.” Ensuing policies ended privatizations—largely in the oil industry, but also of the state’s system for social security. Land reforms capped land holdings, giving the state the capacity to redistribute “idle or unproductive” lands. Like its neighbor, Bolivia, Venezuela granted increased revenue to the state through hydrocarbon laws. The state also increased social services, including delivering food to the poor. As a result, there were reductions in poverty, and evidence suggests that income distribution also improved.

The Great Recession, beginning in the year 2008, has only sparked further Third World suspicions apropos the globally liberalized market model that took root after the Second World War. Banks have thus been temporarily appropriated, industries (risking bankruptcy) have been subsidized, and even certain Keynesian fiscal and monetary policies—largely doomed with the advent of Thatcher/Reagan economic terrorism in the 1970s and 80s—have been implemented. Regardless of spreading markets, and any mournful “benefits,” inequality has only increased, and reducing poverty has either been too slow, or simply nonexistent. The deregulation of markets and industries, which marked the 1990s, haunts nations even today. Forsaken exchange mechanisms, privatized state assets, and strangled welfare programs, all led to extremely disparate inequality, explosive rates of poverty, and social strife. Against all odds, the Third World, and the world’s poor, have responded with incredible resilience, as Bolivia, Venezuela, and others, have. They have emerged as leaders, and their leadership has proven effective. The world cannot afford to wait too long to put them in charge.